Publisher's Letter September 2013

5 key trends in healthcare for 2013

It has been a fascinating first half of the year in the healthcare industry.
The industry continues to evolve, due in part to several key issues impacting
healthcare delivery today. Below we present what we believe are the
five biggest issues facing hospitals and healthcare systems, surgery centers
and physician practices this year.

1. High-deductible health plans.

The shifting focus to high-deductible insurance plans by private employers is
likely to seriously impact healthcare provider margins.
As implementation of the Patient Protection and
Accountable Care Act begins, it is becoming clear that many employers will
begin to move toward HDHPs to keep their insurance costs reasonable.
HDHPs are likely to impact the healthcare industry by slowing consumer
use of healthcare resources. While consumers may not yet have the tools or
transparency to really fully begin price shopping for health services, HDHPs
will likely lead to more immediate caution in consumer spending. That is,
providers often see a slowdown in the first couple months of the year as
patients are paying for their own services out of pocket. This period of
spending caution may extend for several more months.
For a great synopsis of the impact of high-deductible plans on spending,
see “High Deductible Health Plan Study: Five Takeaways” from the California
Healthcare Foundation.

2. Healthcare insurance exchanges.

The development of healthcare insurance exchanges,
recently rebranded as “marketplaces” by the
Obama administration, is moving more slowly than expected. However,
this slower pace in becoming operational may be good news for providers,
as the healthcare exchanges will likely pay providers at lower rates for their
services. The predicted migration of business from commercial payers to
healthcare exchanges is an issue of great concern to providers.
For additional information on healthcare insurance exchanges, please see
the Fitch Ratings’ report “Health Insurance Exchange Clarity Needed to
Gauge Impact,” in which Fitch notes that hospitals are likely to be paid
lower amounts under healthcare exchanges than those they receive from
commercial insurance.

3. Healthcare consolidation.

While a number of independent hospitals remain steadfast
in retaining their independence, we continue to see
independent hospitals entering into discussions regarding mergers and
affiliations with larger partners. Many hospitals remain very concerned
about their ability to stay independent long-term in a changing environment
where future reimbursement is uncertain. However, independent
hospitals that can 1) be dominant in their independent market, 2) operate
in a very lean way, and/or 3) excel in a specific area, may be able to stay
independent for a long time.
For a different view of healthcare consolidation, please see “Healthcare
Consolidation May Bend the Cost Curve the Wrong Way,” by Mitchell
Brooks (March 16, 2012) at


4. Surgery centers remain a good business.

There continues to
be erosion of two key factors that comprise and drive revenue for surgery
centers. Specifically, there continues to be a decline in physician cases
and reimbursement rates. Essentially, there are a limited number of
independent physicians available to invest in ASCs and reimbursement for
surgery centers is not improving. In contrast, one positive development
for surgery centers is that independent physicians in key specialties such
as orthopedics, gastroenterology and ophthalmology are not becoming
employed by hospitals as quickly as originally expected or as quickly as
other specialists. However, there are not as many new specialists today
establishing large independent practices as there have been over the last
20 years. Furthermore, in many areas the surgery center market is relatively
saturated and there are a limited number of independent physicians
available to be owners in third-party ventures or buy in to surgery centers
because a large number of independent physicians already have ownership
interests in other centers or are employed by a health system which
prevents them from becoming owners in third-party ventures. Surgery
centers are also facing the same reimbursement challenges that hospitals
and health systems are facing, including the movement toward
high-deductible health plans and healthcare exchanges.

5. Independent practices and physician trends.

Many independent physician practices, like independent hospitals,
seem intent on remaining independent. However, practices seem to gravitate quickly toward
hospital employment when their professional income decreases by even
relatively small amounts. That stated, if an independent practice wishes to
remain independent, it needs to: 1) have such a dominant position in its
marketplace that is hard for payers to build a network without it, 2) be run
very lean as to be able to survive with the unknown changes and reductions
in reimbursement, and/or 3) be so extraordinary in a specific area, i.e., so
great at its core specialty or by reputation, that it stands out in terms of
patient need or payer need. Physician practices are also facing challenges
with respect to specialist recruitment, as there remain shortages and
surpluses of specialists depending on the market — some markets still have
far more specialists than needed. In addition, it will be fascinating to see
whether hospital-employed specialists’ compensation continues to remain
at the lofty levels it is now in the future, or whether hospitals will reduce
employed specialists’ compensation as reimbursement for hospital services
declines over time due to changes in Medicare and the development of
 healthcare exchanges and high-deductible health plans.

CEO Strategy Roundtable – Nov. 14, 2013
The Becker’s Hospital Review CEO Strategy Roundtable will take place
Thursday, Nov. 14, 2013 in Chicago at the Ritz Carlton Hotel at Water
Tower Place. The day-long event features three tracks, 23 sessions, 50
speakers and 24 hospital and health system CEOs as speakers. Sample sessions include:
• How to Assess Strategy in a Changing World: Thinking 5 Months and
5 Years Into the Future
• ACOs: Current Trends and Issues
• Creating an ACO for Your Own Employees
• Hospital Leadership: What Are the Biggest Opportunities for and
Threats to Hospitals?
• The Road to Population Health: Key Enablers in Implementing Value-Based Approaches
To learn more or register for the event, visit:
Should you have any questions or if I can be of help in any manner, please
do not hesitate to contact me at I can
also be reached at (800) 417-2035.

Very truly yours,
Scott Becker

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